HEBEI WEAVER TEXTILE CO., LTD.

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Rayon market in hard times

Rayon market almost remains in the doldrums recently when sales of VSF and rayon yarn has become rather difficult, leading to production cut for both.

Rayon yarn

It is obvious to see the difficulty of the industry when spinners with strong financial strength in Chengle of Fujian province united to cut production by 50% previously. Spinners in other areas have almost reached a tacit agreement as some of them shut down the lines after running out of raw materials and some have suspended operation to wait and see. The units that have been shut down are mostly for ring-spun, compact siro-spun and siro-spun yarn. Open-end and vortex-spun yarn mills have not shut down lines on large scale, but they have to suspend operation with pressure of rapid inventory accumulation and inventory depreciation.

For spinners, yarns of mainstream specifications in various technology are currently in a state of loss, especially compact siro-spun and siro-spun yarn whose losses have hit a record high of close to 2,000yuan/mt since Jun this year, and the cash flow is obviously in negative territory. Ring-spun, vortex-spun and open-end yarn also suffer losses, especially obvious deficits for the former two products. To products without negative cash flow, the pressure is mainly from the depreciation of stocks. If the spinners do not stop production now, the rapidly accumulated inventory will quickly depreciate in case of sharp decline in raw materials that is the expected risk, so it is a better choice of shutting lines to most spinners at present.

VSF

Some participants think that high price of VSF is the main reason for the shutdown of spinners, which is one of the reasons and the price of VSF has been pushed up by several factors. The continued rising cost is caused by imported dissolving pulp and cannot be solved by Chinese plants. At the same time, there are continuous orders from spinners, so it is the result of rising sales and price, but the uptrend is finally cut off by weak demand and the Fed’s interest rate hike. The sharp decline in some commodities like PSF and cotton have enhanced panics on the market, so the market participants now expect falling VSF price to release the risks. However, there are still divergences since some downstream plants with higher inventory of finished products and raw materials do not expect price decline, while customers who need to buy materials to cover the minimal requirements expect sharp decline. Under the circumstance that the downward trend is clear, it is necessary to follow the trend, that is, to see how much the decline is and how to appease the customers who have taken orders at high price. In fact, the profitability of VSF is not optimistic at present, and the loss has reached nearly 1,400yuan/mt under full cost, so VSF plants cannot bear the significant reduction of price.

Although it is difficult for everyone, it depends on VSF plants to take the next step and get rid of the plight as long as the trading volume can be increasing at a certain price, but a reasonable price requires the game of various factors. There is no futures for VSF and it is hard for industry participants and speculators to quickly reach an agreement, so it is necessary to have negotiation with downstream plants who are willing to purchase raw materials. There will be stronger buy interest from buyers with enough capital and less feedstock inventory, but there should be a sign of demand recovery in the meantime.


Post time: Aug-11-2022